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Grading Marissa Mayer's First Year As Yahoo CEO

In some ways, it’s inherently unfair to grade the new chief executive of a long-struggling company just one year into what everyone knows is a multi-year turnaround attempt.

Still, progress reports have their place. So we took a stab, which you can read here, at grading YahooYahoo CEO Marissa Mayer’s first year at Yahoo.

A couple of things to know: These grades are unavoidably subjective, since no one, even employees and especially outsiders, can know everything that’s happening inside Yahoo. Even then, reasonable people can differ on the meaning or impact of any changes. What’s more, we purposely graded tough.

Why? For one, after years of losing ground on way too many fronts–and a succession of CEOs (and other executives and board members) who couldn’t stop the decline–Yahoo deserves a hard look. Also, Mayer is quite demanding of her folks, as she needs to be if she is to pull off a turnaround, and even more demanding of herself. So I like to think that she wouldn’t have it any other way. (Mayer’s handlers declined to make her available, saying that her main focus right now is on the business.)

Were we too tough? Or perhaps not tough enough? You’ll have to decide, but it’s worth fleshing out the grades with a more nuanced view of how Mayer has done on a number of key business areas.

First, there’s one accomplishment that we did not grade: Yahoo’s stock price. That’s because it’s so striking that we mentioned it in the report card’s introduction and didn’t want to repeat ourselves. But it bears calling out above all else. Yahoo’s shares have risen as much as 90% above the $15.65 a share where they languished the day her hiring was announced, and today they’re still up 75%.

Sure, analysts attribute most of the rise to the rise of Alibaba. The Chinese Internet phenom is expected to go public this year or next, bringing in another multibillion-dollar slug of value in addition to the billions of Alibaba shares Yahoo has already sold off and distributed to shareholders. But Yahoo has had that investment for years, with relatively little impact on its own shares. Even if Alibaba’s recent rise isn’t something Mayer caused, every CEO gets credit for luck and timing as well as actions.

What’s more, it’s clear that Mayer’s energetic activity is a factor in the stock price. To what extent, nobody knows, but it can’t be ignored.

Not least, the incredible rise of the shares sets Mayer apart from her predecessors–in particular, Carol Bartz and Yahoo cofounder Jerry Yang, the two most recent CEOs who weren’t working on an interim basis or, in Scott Thompson’s case early last year, left after only a few months. Under Yang, who took over for Terry Semel (now best known, fairly or not, for fumbling a FacebookFacebook acquisition) and served as CEO from June 2007 to January 2009, Yahoo’s shares fell 60%. Under Carol Bartz, who took over as CEO through September 2011, shares rose 18%–but that amounted to only $1.30 a share, ending up at $12.91.

Put it all together, and even with the Alibaba windfall she didn’t create, Mayer probably deserves an A- on Yahoo’s stock price.

On products, surely one of the key reasons Mayer was hired from GoogleGoogle, she did pretty well, too. Besides making over key services such as email, the home page, and Flickr, she killed two dozen underperforming products. Seriously, couldn’t anyone figure out that Altavista, a popular search engine back when Larry and Sergey were still at Stanford, was completely worthless years ago? Apparently not, but Mayer did. And lately, as she said in the second-quarter earnings call, Yahoo has picked up the pace on new products, putting out about one a week and reigniting at least some audience growth in the process. That’s a big change.

The reason we gave her only a B- on products was that there are still a lot of missing pieces. Yahoo has no social network. Its mobile apps aren’t especially competitive. It’s trailing YouTube and others as a destination for video. And as strange as it may seem for a CEO who came from Google, her company has also lost more ground in automated ad buying, as its pioneering Right Media ad exchange has languished and Google, AppNexus, and a raft of ad tech startups have stolen a march. But in a promising sign, insiders say Mayer has now shifted her focus toward ad tech while also continuing to scout out new “daily habit” consumer services to buy.

On both acquisitions, which we rated a B, and morale, for which we gave a B+, Mayer has also done well. Nobody’s quite sure whether all those acquisitions, especially the $1.1 billion purchase of Tumblr, will pan out. Morale is clearly up, with former employees “boomeranging” back to Yahoo and job applications way up, though if some didn’t like Mayer’s ban on people working from home.

Mayer has been less successful, though, in helping Yahoo grow again. After a flat year in 2012, revenues have resumed a decline–by 7% so far this year. Earnings are way up–but again thanks largely to Alibaba income. Even knowing how tough it is to reverse Yahoo’s long-term decline, it’s hard to give more than a C for this effort.

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Alibaba, Yahoo Japan, the yen hedge, and stock buybacks are the reasons for Yahoo’s higher stock price. Now that Loeb has left, investors see a greater risk that Mayer will overpay for acquisitions and issue too many stock options where future buybacks would only be used to offset the dilution and not meaningfully reduce the share count.

And if Yahoo has become such a cool place again and the best talent is beating down the door to get into the place, why is there a need for all these expensive “acqui-hires”? Why not just hire people the old fashioned way which would ostensibly save a fortune in hiring costs?

Also, Yahoo seemed a bit desperate when they lowered their standards and slithered into the porn business (Tumblr). Not a good idea to mix hard core porn and young kids together like peanut butter and jelly which is what Tumblr does. This may be one of the reasons why Mayer’s handlers want to keep her shielded from difficult questions.

The grade should be an F- for putting ads on the PAID BUSINESS EMAIL. See examples here: http://www.youtube.com/channel/UCAS14n3714BP_t_6cI8Eu_Q

This started on the 19th of July and is continuing today. Three calls to Business email tech support has gotten me nothing. “it’s a glitch.” “It will be fixed in under 24 hours.” “It’s an IE problem.” No, it happens on the Opera Mini and Mobile and Samsungs default browser in my touch screen device. “It’s your computer .” NO it is happening on my Android device too.

This on top of the simultaneous rollout of an Android Mail APP that won’t access the Business mail and a New YAHOO Web Mail that won’t work on a touch screen device.

The “fix” for the web mail is a “BASIC” version that can only be accessed from a PC and only stays active as long as you stay logged into the account. If I log out, the next time I go to the web mail on the mobile device I an defaulted back to the “FULL FEATURED version ” that won’t work on a touch screen.

The ads appear to be deliberate since they ONLY happen in the “ BASIC” version and they are clearly being served up by Yahoo and they are targeted based of information Yahoo can glean from my Yahoo activities.

Compared to some of her predecessors downright spectacular. To those who credit her successes to ‘luck’ I’d like to point out that shareholders care little for the source and will continually support someone who is ‘lucky’.